Follow the Trends

The goal in stock investing is to following the trends. If the market is going up, that is considered a bull market, and if it's going down, that's considered a bear market.

A Market trend is the direction in which a financial market is moving. Market trends can be classified as primary trends, secondary trends (short-term), and secular trends (long-term). This principle incorporates the idea that market cycles occur with regularity and persistence.

However, the assumption that market prices move in trends is one of the major components of technical analysis, and consideration of market trends is common to most Wall Street investors. Market trends are described as sustained movements in market prices over a period of time. The terms bull market and bear market describe upward and downward movements respectively and can be used to describe either the market as a whole or specific sectors and securities (stocks). The expressions "bullish" and "bearish" can also mean optimistic and pessimistic respectively ("bullish on technology stocks," or "bearish on gold", etc).

A bull market is one in which prices of a certain group of securities are rising or are expected to rise. It is a prolonged period where the investment prices rise faster than their historical average. In such times, investors have faith that the market will continue to rise in the long term. Bull markets can happen as a result of economic recovery, an economic boom, or investor psychology.

A bear market is an opposite of bull market; it is characterized by falling prices and an expectation that they will continue falling. When the market is bearish, it leads to a slow down of economy together with a rise in unemployment and inflation. In both the cases, people invest. Those who invest in a rising market and think that it will continue to be so are called bullish investors while those who trade in falling markets and think that it will continue to be so are known as bearish players.

The important point to always remember is to Follow the Trend!


Sources: Wikipedia & Essortment